Short-term interest rates are expected to rise in twelve months, a net 42% of fund mangers said, up sharply from 29% in the May poll. A net total 59% of managers expect higher long-term rates in a year, up from a net 50% taking this view in May.

Managers are also taking risk off the table, with the proportion overweight cash up to a net 18% in June, from a net reading of 15% in May. A net 76% of respondent believe that equity market volatility will be higher, compared to 69% taking this view last month.

"The abrupt change in interest-rate expectations over the past two months has begun to impact equity valuations," the survey said. "Equities are not as cheap as they were."

Less positive for equities

Investors are now less positive on equity market performance. The net proportion of managers saying they believe it's unlikely that markets will be lower in six month fell to 14%, from 23% a month ago and 34% in March.

Around 4% of managers now believe that global equity markets are overvalued, a noticeable change from a month ago, when a net 6% of managers said that they believe equity markets are undervalued.

Managers are more positive on bond markets, with a net 40% saying in June that global bond markets were overvalued, down from 44% in May and 50% in April.

Regionally, asset allocators still prefer Europe over the U.S., the U.K. and global emerging markets, although the preference is less marked than a month ago.

The proportion of managers who believe European shares are undervalued has fallen to 16% in June, from 22% in May.

Managers have kept the same view on the U.S. equity market, with a net 15% saying that it is still overvalued. The U.K. equity market has moved into overvalued territory, the managers believe, with 2% taking this view, compared to a neutral reading in May.

Japanese stocks are looking slightly more undervalued, according to the survey, with a net 10% taking this view, up from 8% in May. A net 5% believe that global emerging markets are overvalued, down from 10% a month ago and 16% in April.

A net 23% of managers believe that the yen will appreciate the most on a trade-weighted basis over the next 12 months, down from 27% holding this view in May.

A net 9% believe the U.S. dollar will depreciate the most, compared to 27% in May, while 3% believe the euro will depreciate the most, a shift from last month when 5% said that they believe the euro will appreciate the most.

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